States defiant, vow to dismantle Discos’ grip amid Enugu blackout

State governments have lambasted the Enugu Electricity Distribution Company following a major reduction in electricity supply from EEDC to MainPower Electricity Distribution Limited for onward distribution to residents of Enugu State.

Based on the power cut, the states declared their resolve to begin the process of licensing new power distribution companies in order to break the monopolies of existing Discos, describing the action of EEDC on Monday as “blackmail” and “arm-twisting”.

The states further insisted on their regulatory powers to determine the cost of tariffs in their various domains, stressing that the Electricity Act had expressly given them the authority to do so.

The Forum of Commissioners of Power and Energy in Nigeria declared that states would not succumb to blackmail, especially as the Enugu Electricity Distribution Company reduced power supply to Enugu State due to a tariff cut.

But the current power distributors stated that the proposed new distribution companies would not pose a threat to the existing ones, as they claimed that no one could sell electricity below its actual cost.

Following the enforcement of the Band A tariff reduction by the Enugu Electricity Regulatory Commission on August 1, residents in parts of Enugu State were thrown into darkness for four consecutive days.

Reacting to this, the Secretary of the Forum of Commissioners of Power and Energy in Nigeria and Commissioner of Power, Renewable Energy and Transport in Benue State, Omale Omale, said MainPower and EEDC were only trying to blackmail the Enugu regulator.

Omale said states would not go back on the plan to decentralise the power sector, asking states to open the distribution market to others who can abide by their orders and regulations.

“I can say that this could just be a cheap blackmail to arm-twist the regulatory authority in Enugu State. Of course, the market is liberalised, and Enugu should know what to do. This will certainly also be a frontier for other distributors to come in, then we’ll get cost-reflective tariffs,” Omale said.

Earlier, MainPower Electricity Distribution Limited disclosed that the blackout in parts of Enugu State was a result of a major drop in electricity supply from its energy supplier, the Enugu Electricity Distribution Company. The company, which manages distribution in several communities across the state, said it is now operating on just 50 per cent of its usual energy allocation.

In a statement issued by MEDL on Monday, the company disclosed that the blackout was traced to a fallout from a new Tariff Order recently issued by the Enugu Electricity Regulatory Commission. The EERC sparked controversies recently when it issued an order that slashed the tariff for Band A customers from N209.50 per kilowatt-hour to N160.40/kWh

“Mainpower Electricity Distribution Limited wishes to inform its esteemed customers in parts of Enugu State who have been experiencing power outages over the past four days that the situation is due to a significant drop in energy allocation from our parent company, Enugu Electricity Distribution Company Plc.

“This development is a result of the recent issuance of a new Tariff Order to Mainpower by the Enugu Electricity Regulatory Commission. The Order reduced the tariff for Band A customers from N209.50/kWh to N160.40/kWh,” the Disco said.

MainPower explained that it promptly updated EEDC when the order was issued, and it was discovered that implementing the tariff reduction would result in a monthly loss of over N1bn, impacting its obligations to the market.

“Upon receipt of the Tariff Order, MEDL, by obligation, promptly updated EEDC (our energy supplier).

After analysing the implications of the new tariff, EEDC concluded that implementing it would result in a monthly loss of over N1bn, which makes it impossible for EEDC to meet its obligations to the market.

“Consequently, and to mitigate these losses, EEDC made the difficult decision to reduce the volume of energy supplied to MEDL. This has unfortunately resulted in MEDL receiving only about 50 per cent of its usual energy allocation, significantly affecting our ability to serve some of our esteemed customers,” the statement partly read.

MainPower clarified that it does not receive electricity directly from the national grid, saying, “Instead, we rely solely on EEDC, which holds the vesting contract agreement with the Nigerian Bulk Electricity Trading, the organisation responsible for electricity bulk trading.”

The company acknowledged the delay in informing the public, noting that it was caused by the short notice with which it received full details of the unfolding situation.

“We also acknowledge that this communication is coming later than expected. The delay was due to the short notice with which we received the full details of the development,” the management said.

MEDL called on its customers to remain patient as it works with state and federal stakeholders like EERC, EEDC, the Nigerian Electricity Regulatory Commission, NBET, and the Nigerian System Operator to urgently resolve the issue.

“We deeply regret the inconvenience this situation has caused our valued customers. Please be assured that discussions are ongoing with key stakeholders at the state and federal levels (including EEDC, EERC, NERC, NISO, and NBET) to quickly resolve this issue. We are hopeful that a resolution will be reached within the next 48 hours or soon thereafter.

“We appeal for your continued patience, calm, and understanding as we work diligently with the relevant authorities to restore normal service as soon as possible,” the statement concluded.

States to meet minister

The Secretary of FOCPEN, Omale, disclosed that the group had a meeting with the Minister of Power, Adebayo Adelabu, after the argument that greeted the tariff cut in Enugu.

He stated that Adelabu had planned to meet the stakeholders in Enugu, saying the power cut to Enugu State happened while everyone was still waiting for the minister’s meeting.

“We saw what MainPower brought. I know that it’s meant to arm-twist the regulatory authority in Enugu State. After Enugu did that, in our position, we had a meeting with the Minister of Power. He advised that he wants to meet and appreciate the position of Enugu, and then ensure a balance. That was for Enugu and the minister to do. While that is yet to happen, we see this (power cut) happen,” he said.

Asked if the steps taken by EEDC and ManiPower would deter other states from going ahead with their plans to design their own cost-reflective tariffs, Omale replied in the negative.

He said both the federal and state governments were working towards cost-reflective tariffs, saying all stakeholders should come together to determine what the actual tariff is.

“Everybody, by national policy and even state policy, is driving towards cost-reflective tariffs. This will not in any way affect that plan. What the pilot initiative by Enugu threw up is the need for more close stakeholders’ interaction and engagement to arrive at what is cost-reflective.

“The independence of a state regulator is not very absolute; there are overlaps. So, the takeaway from our review meeting is that, once you come up with that and you bring the relevant stakeholders to the table, be them the Nigerian Electricity Regulation Commission, and the representative of the Ministry of Power, and jointly a representative tariff is reached, nobody will renege.

“Everybody is like, ‘How did you do this? Is this going to affect distributors’ investments or does it protect them?’ That is their fear. Others are like, ‘Does that take into account the generation cost and the transmission cost? Once everybody is on the scope and then they come to realise that the tariff doesn’t touch generation and transmission, but merely deals with the cost elements of the distribution path, then everybody will be safe and fine,” he added.

Omale argued that if MainPower feels its distribution costs have been impacted by the tariff cut, it should open its books.

“If MainPower wants to say otherwise, they should open their books, because to arrive at whatever tariff, using whatever methodology, in this case, cost-reflective methodology, your books must be open. What is the cost of the purchase or procurement from the generation? What is the cost of transmission?

“These are constant. Then what are the distribution costs? You put your distribution, then what is their liable profit margin? Once that is built, then you arrive at a tariff cost. So, I think all that I take home from there is that, once you get all relevant stakeholders on the table and all investment elements are protected, then nobody can renege,” he stressed. (PUNCH)